Instructions: Students should answer the following questions:
1. You want to purchase one of the following milling machines.
Machine A Machine B
InitialCost
$20,000
$30,000
Life
10 years
10 years
Salvage Value
$2,000
$5,000
Annualreceipts
$9,000
$12,000
Annualdisbursements $3,500
$4,500
What are the approximate rates of return for machines A and B, respectively?
a) 22.5% and 28.2%
b) 23.9% and 27.0%
c) 24.8% and 22.1%
d) 25.0% and 26.8%